Finance / 11.07.2020

Judge Rules SBA Must Release Information for All PPP Borrowers

By Demetrius Robinson

PPPA federal judge has ruled the Small Business Administration (SBA) must release detailed information for all Paycheck Protection Program (PPP) loans. This includes both the identities of loan recipients and loan amounts. The underlining case was brought by a number of media agencies under the Freedom of Information Act (FOIA) after they had requested that the SBA disclose who had received a PPP or Economic Injury Disaster (EIDL) loan under the CARES Act.

The SBA had previously announced that it would release information about who had received a PPP loan above $150,000, including business names, addresses, NAICS codes, loan amounts and other demographic data. However, if the loan was less than $150,000, the SBA refused to release the business name and address for any such recipient, although the other data was released. Various news agencies challenged the right of the SBA to withholding this information and sought full disclosure of all PPP and EIDL loan data. In denying the disclosure of this information, the SBA had invoked two exemptions under FOIA indicating that the data was either confidential or that the disclosure of the data would be an invasion of privacy. Subsequently, the news agencies brought suit in federal court seeking the full disclosure of the data.

In court, the SBA argued that it was necessary to prevent the disclosure of certain “confidential” data as the information could allow a third-party to calculate the payroll information for a company (thereby providing an unfair competitive advantage). Under the PPP loan program, companies receiving a PPP loan used their payroll data to calculate the amount of potential PPP funding by taking an average of their payroll and multiplying that by 2.5. The US District Court found that there was little evidence that the extraction of such information would be inevitable and lead to the extraction of confidential data to a third-party. While it may be possible to use the amount to try to decipher companies’ particular payroll information, it is not a good indication; a company may have requested less money then it may have been eligible for, had employees who were paid in excess of $100,000 or other factors that would prevent a competitor from accurately calculating a company’s payroll information based solely on the PPP loan data. Therefore, the court found that the SBA did not meet its burden for the use of the exemption for withholding the information.

In addition, the SBA also argued that the disclosure of the information would constitute an invasion of privacy. Unfortunately, the court did not buy this argument either. In fact, the court found that the SBA lost this argument before it was even presented. It found that although the disclosure of the information may be an invasion of privacy, the borrower expressly waived this right when applying for the loan as the loan application expressly provided that certain information could potentially be disclosed, including the name of borrowers and the amount of the loan.

Therefore, based upon the court’s holding, it is likely that the SBA will be required to release the remaining information related to who received a PPP and/or an EIDL loan. Companies that may have received a PPP and/or an EIDL loan should be aware that their information may now become available to the general public. The disclosure of this information may cause additional scrutiny and unwarranted solicitations from third-parties. Therefore, companies should ensure that they take the necessary precautions to protect themselves.

KJK continues to be on top of this unique program and assisting clients to navigate through the Payroll Protection Program. If you have any questions or need further information, please feel free to contact Demetrius Robinson at djr@kjk.com or 614.378.8067.

 

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